http://dailynews.yahoo.com/h/ap/20010618/pl/power_prices_9.html

Monday June 18 4:47 PM ET

Regulators Order Price Restraints

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON (AP) - Federal regulators tentatively agreed Monday to order price restraints on electricity sales across the West but not the stringent cost-based controls sought by California.

The Federal Energy Regulatory Commission (news - web sites) reached agreement on the new price restraints during daylong negotiations. A vote by the five commissioners was expected later in the day.

FERC Chairman Curtis Hebert said the order, which would be effective through September 2002, would benefit consumers but also ``provide every incentive for suppliers to reduce costs.''

The order would expand price restrictions the agency imposed in April on wholesale electricity sales in California during peak demand periods when blackouts were threatened. It also would cover power transactions 24 hours a day, seven days a week throughout 10 Western states in addition to California.

The price cap would be pegged to the cost of production at the least efficient electricity generating plant in the region. It also would close several loopholes that have allowed power generators to circumvent the April order.

That April order had been effective in reducing California's power costs in recent months, said Hebert, who described Monday's action as simply an expansion of that decision.

All five commissioners expressed their support for the plan, including recent appointees of President Bush (news - web sites) and both Democrats on the panel.

``This order moves sharply in a direction that I have advocated for eight months,'' said Commissioner William Massey, a Democrat. ``It eliminates any opportunity for megawatt laundering'' through transactions allowed by loopholes in the April order cited by California officials, he said.

Massey said he would have preferred tougher caps based on a generator's cost of service, but a majority of the panel did not support that approach.

Linda Breathitt, the other Democrat, said the order should ``provide breathing room for the markets to correct themselves.''

``The blame game should end today,'' said Nora Brownell, a former Pennsylvania regulator who took office last month based on Bush's appointment.

The expansion was urged by congressional Republicans as a way to stem the growing pressure from Democrats for broader price controls on electricity. Some GOP lawmakers fear high energy prices, if not contained, could hurt them politically in next year's congressional elections.

Hours before the commission planned to meet, Bush hinted that he might go along with some additional price restraints, although he reiterated his opposition to ``firm price controls.''

``I want to see what they have to say,'' Bush told reporters at the White House. ``They know full well my administration's belief that price controls will not solve the problem.''

But Bush added, ``They're not talking about firm price controls. They're talking about a mechanism ... to mitigate any severe price spike that may occur, which is completely different from price controls.''

California officials, meanwhile, issued warnings of possible rolling blackouts Monday and Tuesday afternoon as a heat wave threatened to send temperatures to 100 degrees or above in some areas of the state.

Democrats, newly in control of the Senate, have demonstrated they intend to make energy costs a key issue. They already have launched a series of hearings on the California power problems and called for price caps on Western electricity sales.

Western power markets ``are out of whack'' and the federal government is obligated by law to ensure prices are just and reasonable, contends Senate Majority Leader Tom Daschle, D-S.D.

Sen. Jeff Bingaman (news - bio - voting record), D-N.M., the new chairman of the Senate Energy and Natural Resources Committee, said Monday he was skeptical that FERC would take adequate measures. However, he said he would wait until later this week to decide whether to pursue legislation mandating price controls.

Bingaman's committee was to hear from the five FERC commissioners Tuesday. Meanwhile, Sen. Joseph Lieberman (news - bio - voting record), D-Conn., also planned hearings on FERC and the California power problems later this week in his Governmental Affairs Committee.

GOP congressional leaders, meanwhile, stayed firm in their opposition to price controls.

``When Democrats say price caps, I believe that's the problem, not the solution,'' said Senate Minority Leader Trent Lott, R-Miss.

``Measures like price caps would plunge California deeper into its electricity supply crisis,'' House Majority Whip Tom DeLay, R-Texas, declared in a letter to FERC released Monday. He said additional price controls ``are an invitation to a radically dysfunctional electricity market and economic chaos.''

But a growing number of GOP lawmakers also have become worried that if Republicans are viewed as obstructionist in the face of soaring Western electricity costs and high gasoline prices nationwide, they could lose control of the House in the 2002 midterm elections.

More than a dozen House Republicans urged FERC in a letter last week to broaden the electricity ``price mitigation plan'' it approved in April and extend price limits to all sales and to 10 other Western states.

Currently, the order is confined to California whenever power reserves fall to below 7.5 percent, triggering an emergency.

California Gov. Gray Davis (news - web sites), a Democrat, claims FERC's earlier action has done little to ease his state's power problems because it set limits too high and allowed power providers to easily avoid the caps.

``We will continue to demand that the federal government finally do its job by requiring reasonable prices for electricity,'' Davis said Monday.

The 10 states in addition to California in the Western power grid are Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

-

On the Net:

Federal Energy Regulatory Commission: http://www.ferc.fed.us/

-- (in@energy.news), June 19, 2001

Answers

Cheney Energy Task Force Under Investigation

-- (bush@twofaced.scum), June 19, 2001.